Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
A female applicant applies for a position that was widely advertised. During her interview she insists on being paid $100,000. The employer agrees to her salary demand although it employs a male doing substantially similar work for $125,000. Has the employer violated the federal Equal Pay Act?
On December 2, 2021, Judge Lawrence E. Kahn of the U.S. District Court for the Northern District of New York refused to strike from a federal Equal Pay Act (EPA) action the employer’s affirmative defense alleging that salary negotiations constituted a “factor other than sex” that excused any wage disparity between comparable employees performing comparable jobs. The Equal Employment Opportunity Commission (EEOC) had asked the court to reject this defense as a matter of law. In denying the EEOC’s request, the court left for determination at trial whether the employer’s use of “salary negotiations” constituted a legitimate affirmative defense to EPA claims.1
Available Affirmative Defenses Under the Federal Equal Pay Act
Once a plaintiff establishes a prima facie case under the EPA,2 the burden shifts to the employer to offer a legitimate reason for why the compensation differs. An employer may overcome the prima facie showing by demonstrating that the difference in compensation results from: (i) a seniority system; (ii) a merit system; (iii) a system that measures earnings by quantity or quality of production; or (iv) a differential based on any factor other than sex.
To establish the “factor other than sex” defense, an employer must demonstrate that it had a legitimate business reason for the gender-neutral factor that brought about the wage differential.3
This fourth variety of affirmative defense was at the center of the parties’ dispute in Hunter-Tannersville Central School District.
Factual Background Regarding Employer’s Affirmative Defense to EEOC’s Equal Pay Act Claim
The EEOC filed a complaint against an employer for potential discrimination and a violation of the EPA after the employer hired a female as superintendent to replace a male superintendent. The male superintendent earned more than the female, and also received additional benefits. In response to the complaint, the employer asserted (among other affirmative defenses) that any pay differential the EEOC identified was the result of factors other than sex, as permitted by 29 U.S.C. § 206(d)(1)(iv). Specifically, it claimed the “other than sex” factor was the ability of the male comparator to negotiate a higher salary. The EEOC filed a motion to strike this affirmative defense.
The District Court’s Decision
The EEOC argued that the affirmative defense in question was legally insufficient because the ability to negotiate a higher salary is not related to the performance of the superintendent job. The court, however, was unpersuaded that “only job-related factors could constitute a ‘factor other than sex.’”4 As a result, the court denied the EEOC’s motion to strike, thereby leaving viable for now in this case the affirmative defense that negotiation is a “factor other than sex” that an employer can rely upon to defend against an EPA claim.
Takeaways and Guidance Outside Northern District of New York
Neither the Supreme Court nor any appellate court has explicitly held that salary negotiation is not a valid “factor other than sex” defense to an EPA claim. Indeed, at least two circuit courts have held that negotiation is a valid defense,5 and many federal district courts have ruled similarly.6 The EEOC’s own guidance on gender-based compensation disparity suggests that salary negotiation could form a valid defense to an unequal pay claim, but only where the employer treated applicants of different genders similarly with respect to the availability and even-handedness of such negotiations:
If the employer did not bargain with the higher-paid comparator it will cast doubt on the employer’s argument that it had to offer a higher salary to compete for him/her. And even if there was bargaining, the investigator should consider whether the employer bargains differently with men than women (e.g., responds more favorably to men’s demands than to women’s demands).7
It is far from a foregone conclusion that a negotiations affirmative defense would be permitted to reach the jury in a majority of jurisdictions.8 Further, based on the EEOC’s published guidance and its stance in recent litigation, any employer relying upon such a defense in an EPA case brought by the agency should expect to have both the factual and legal basis of its assertions contested vigorously. Given these factors, an employer that determines initial salary based upon negotiations should ensure that its negotiation policies and practices are equally applied to male and female applicants. More importantly, any wage differential ostensibly resulting from salary negotiations that would exist between comparable employees of different genders performing comparable jobs should prompt the employer to review the fairness of its processes. Such disparate salaries should not be implemented unless their fairness can clearly be supported by legitimate business reasons, including documentation of the negotiation processes that led to the agreed rates of pay.
1 EEOC v. Hunter-Tannersville Central School District, No. 121CV0352LEKATB, 2021 WL 5711995 (N.D.N.Y. Dec. 2, 2021).
2 The three elements required for a prima facie case are: (1) the employer pays different wages to employers of the opposite sex; (2) the employees perform equal work on jobs requiring equal skill, effort, and responsibility, and (3) the jobs are performed under similar work conditions. Corning Glass Works v. Brennan, 417 U.S. 188, 196 (1974).
3 Zhengfang Liang v. Café Spice SB, Inc., 911 F.Supp. 2d 184, 202 (E.D.N.Y. 2012); Aldrich v. Randolph Cent. School Dist., 963 F.2d 520, 525 (2d. Cir. 1992) (“[a] job classification system resulting in differential pay [must be] rooted in legitimate business-related differences in work responsibilities and qualifications ….”).
4 EEOC v. Hunter-Tannersville Central School District, 2021 WL 5711995, at *3. In so holding, the court cited with approval the reasoning in Christiana v. Metro. Life Ins. Co., 839 F. Supp. 248, 253 (S.D.N.Y. 1993) that Aldrich’s job-relatedness requirement—in addition to the legitimate business reason requirement—for the EPA’s catch-all exception, was limited to the specific facts of that case.
5 See, e.g., Horner v. Mary Inst., 613 F.2d 706, 714 (8th Cir. 1980) (negotiations that led to male comparator’s higher salary can establish a valid “factor other than sex” defense to an unequal pay claim); Dey v. Colt Const. & Development Co., 28 F.3d 1446, 1462 (7th Cir. 1994) (affirmed summary judgment on EPA claim where employer argued that male comparator had negotiated a higher salary and this was a factor “other than sex” that justified his higher salary). The Fifth Circuit also suggests that negotiation, where equally available to both sexes, may be a legitimate, non-discriminatory explanation for a pay differential, although it remains an open question. Thibodeaux-Woody v. Houston Community College, 593 Fed. Appx. 280 (5th Cir. 2014). There, the court determined questions of fact surrounded whether the employer had bargained equally with male and female employees, and remanded the matter for further proceedings on the issue. The court stated, “[i]f negotiation is not available to persons of both sexes, it cannot be a legitimate, nondiscriminatory reason for a pay differential.” Id. at 285 (emphasis in original).
6 See, e.g., Grigsby v. AKAL Security, Inc., 2018 WL 3078769 (W.D. Mo. June 21, 2018) (salary negotiation leading to higher pay is a valid affirmative defense to a claim under the EPA); Ewald v. Royal Norwegian Embassy, 82 F.Supp.3d 871, 947 (D. Minn. 2014) (recognizing that negotiations leading to a comparator’s higher salary, or a demand for a specific salary, may establish a valid “factor other than sex” defense to an unequal pay claim); Rexroat v. Arizona Dept. of Educ., 2013 WL 85222 at *7 (D. Ariz. Jan. 8, 2013) (ruling in favor of defendant on the “factor other than sex” defense, noting that “Plaintiff did not attempt to negotiate a higher salary”); Rhoades v. YWCA of Greater Pittsburgh, 2010 WL 2991236 at *8 (W.D. Pa. July 27, 2010) (holding that “[w]here a proposed comparator negotiates a higher salary based on his prior employment, courts have determined that the salary discrepancy was based on a factor other than sex, and granted summary judgment for the employer”), aff’d. 423 Fed.Appx. 193 (3d Cir. 2011); Weber v. Infinity Broadcasting Corp., 2005 WL 3726303, at *5 (E.D. Mich. Dec. 14, 2005) (holding that “[n]egotiation is a permissible factor other than gender to consider in determining wages”); Underwood v. Sears & Roebuck & Co., 343 F.Supp.2d 259 (D. Del. 2004) (granting summary judgment on EPA claim where comparator negotiated a higher salary based on increased responsibilities and longer commute and plaintiff did not provide any evidence that shed doubt on justification); McNierney v. McGraw Hill, Inc., 919 F.Supp.853, 860 (D. Md. 1995) (granting summary judgment on EPA claim where plaintiff and comparator were offered same salaries, but comparator negotiated a higher salary and plaintiff did not); EEOC v. Louisiana Network, 809 F.Supp.1210, 1228 (M.D. La.1992) (recognizing “negotiation” as a valid factor other than sex to explain a differential in wages).
7 See EEOC Compliance Manual, Section 10: Compensation Discrimination, No. 915.003 (12/05/2000), at §10-IV F.2.g, available at https://www.eeoc.gov/laws/guidance/section-10-compensation-discrimination.
8 See, e.g., Dreves v. Hudson Grp. (HG) Retail, LLC, No. 2:11-CV-4, 2013 WL 2634429, at *8 (D. Vt. June 12, 2013) (“[T]here is simply no basis for the proposition that a male comparator’s ability to negotiate a higher salary is a legitimate business-related justification to pay a woman less”).